Topic

Reputation and Information Design

Abstract

Can the commitment assumption underlying information design be replaced by reputational enforcement? A long-run sender
periodically makes cheap talk announcements to the public, anticipating how
it may affect his reputation as a trustworthy type. As he becomes
perfectly patient, his payoff converges to his information-design value in all
equilibria. By contrast, in the standard repeated game, he typically
underperforms compared to information design. In a specialized environment, we
show that convergence also happens in behavior: players' equilibrium
behavior coincides asymptotically with the information-design solution.
We also examine welfare properties numerically by adapting strategic
dynamic programming to reputational games.